Friday, August 26, 2011

New Issue of Our Hedge Fund Wisdom Newsletter Now Available!

The brand new Q2 2011 issue of Market Folly's premium newsletter is now available. Current subscribers please login at to download it.

Free Sample: If you haven't had a chance to check out our newsletter, you can download a full past issue by clicking here (.pdf)

Included in our brand new 83-page issue:

- Equity analysis: Written by hedge fund analysts, this issue details the investment thesis summaries on American International Group (AIG), Sensata Technologies (ST) and First Solar (FSLR) ~ all stocks that saw intriguing buying during the quarter

- Consensus List of the top buys and sells from hedge funds

- Updated Portfolios
of 25 prominent hedge fund managers
(see the full list of managers here)

- Expert Commentary and analysis of each fund's moves

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What We're Reading ~ 8/26/11

Our guest post: takeaways from recent hedge fund activity [BigPicture]

Paulson, Tepper, Loeb & other hedgies all bought this stock [Forbes]

Icahn makes $120 million on falling S&P [FINalternatives]

Jeff Ubben buys big during the chaos [Institutional Investor]

Bernanke's speech from today [The Big Picture]

Gold at $1800 is a fool's bet [AR + Alpha]

On getting long Bank of America (BAC) [Bronte Capital]

Interview with George Soros [Der Spiegel]

BlackRock's Fink says buy dividend stocks instead of treasuries [Barron's]

Interview with 105 year old banker Irving Kahn [Daily Beast]

Hedge funds most bearish since 2009 [Bloomberg]

Tudor's new fee structures [WSJ]

Buffett has been buying during downturn [LATimes]

Michael Lewis' latest article [Vanity Fair]

Morning with Charlie Munger transcript [My Investing Notebook]

Wednesday, August 24, 2011

JANA Partners' Presentation on McGraw-Hill (MHP): Reasons to Split Up the Company

Earlier today we posted up about hedge fund JANA Partners' activist push against McGraw-Hill (MHP). Barry Rosenstein's hedge fund (along with the Ontario Teachers' Pension Plan) owns 5.6% of the company and is pushing for MHP to split up into four separate entities.

JANA just met with the company on Monday (August 22nd) to present their case. Here's the hedge fund's rationale for splitting up MHP:

- MHP's conglomerate structure acts as a significant constraint on each of its businesses, hampering operational performance, strategic flexibility in allocating capital and share price valuation

- MHP has much more meaningful and beneficial opportunities to improve operating performance and clarify the underlying value of its assets than the actions taken to date (such as seeking to sell broadcasting, which accounts for only ~2% of total EBIT)

- A wide ranging, transformative and comprehensive resolution of the corporate structure and cost structure is essential for MHP to improve operating performance and shareholder return

- Separating MH Education, Information & Media and the S&P Index business would position these businesses to improve performance and participate in consolidation, thus unlocking value

- Collapsing MHP's corporate cost structure and eliminating duplicative overhead costs would enhance this value creation

- Accelerated share buybacks would multiply the value creation impact of these changes

- Bolstering S&P Ratings with an independent oversight figure would help the business navigate an increasingly complex global regulatory environment and heightened public focus

- The real question is why would MHP not promptly take these steps to improve operating performance and unlock shareholder value?

JANA's recent slideshow presentation to the company is embedded below (email readers need to come to the site to view it):

In response to JANA's presentation, McGraw-Hill issued a statement that their review of the company's options for splitting up is "well advanced and expected to result in significant actions in the next few months to accelerate global growth, align appropriate cost structures and build shareholder value."

The question is whether McGraw-Hill opts for the more aggressive four-pronged break-up or if they are eyeing the smaller split up as they are said to be considering.

Roberto Mignone's Bridger Management Buys More United Rentals (URI)

In a 13G filed with the SEC, Roberto Mignone's hedge fund Bridger Management has disclosed a 5.2% ownership stake in United Rentals (URI) with 3,241,704 shares.

This marks a 60% increase in their position size since the end of the second quarter. Bridger Management now owns just over 3.2 million shares of URI due to portfolio activity on August 8th.

Per Google Finance, United Rentals "is an equipment rental company and its network consists of 531 rental locations in the United States and Canada. United Rentals offers approximately 2,900 classes of equipment for rent to customers that include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities."

To see the rest of this hedge fund's investments, head to the brand new issue of our premium newsletter.

JANA Partners Pushes For McGraw-Hill (MHP) Split Up

Ah, the smell of activist investors in the morning. Barry Rosenstein's hedge fund JANA Partners recently filed an amended 13D with the SEC in conjunction with the Ontario Teachers' Pension Plan regarding shares of McGraw-Hill (MHP). The activist investment disclosure revealed that they now own 5.6% of the company.

They originally disclosed the stake earlier this month and have since bought over 1 million more shares. While JANA also focuses on event-driven investments, they're well known for making activist pushes to generate change in companies they invest in.

JANA's Split Up Plan

The hedge fund wants McGraw-Hill to split up into four entities: Standard & Poor's ratings agency, the indexing business of S&P, the information & media business, and the education unit.

It seems that this is a much more detailed and ambitious plan compared to what MHP was considering. The company was looking into divesting its educational publishing business and its broadcasting unit.

So why is JANA interested in MHP in the first place? In their filing, they write, "(MHP) has consistently underperformed its potential and traded at a sizable discount." So as always, the hedge fund wants to make money on their investment and think a split-up/spin-off is the ideal way to generate shareholder value.

The only potential 'hurdle' going forward (if you want to call it that), is that McGraw-Hill is largely a family business, though Mr. McGraw owns only around 4% of the company. It will be interesting to follow the activist saga unfold.

In recent portfolio disclosures, JANA has 24% of its reported US equity long investments allocated to one stock. Find out which one it is and see the rest of 25 hedge fund portfolios in the brand new issue of our premium newsletter.

Update: We've also posted JANA's presentation on McGraw-Hill.

Stephen Mandel's Lone Pine Capital Buys the Dip in VanceInfo Technologies (VIT)

Stephen Mandel's hedge fund firm Lone Pine Capital has been busy buying lately. In an amended 13G just now filed with the SEC, Lone PIne has disclosed a whopping 17.6% ownership stake in VanceInfo Technologies (VIT) with 7,862,536 shares.

Per portfolio activity on August 19th, Mandel's hedge fund has ramped up its position size by buying an additional 7.5% of the company. We recently covered how Lone Pine bought VIT in late July and back in late 2010 as well.

Lone Pine Likes Information Technology

Since Lone Pine's additional buy just three trading days ago, shares of VIT are down a little lower around $11.84. VIT operates in the information technology sector and some investors seem to think that the company's underlying business could be slowing down at a rapid rate, given that more than half their business is in China.

Lone Pine also has a large position in another information technology company. The hedge fund has long held a stake in Cognizant Technology Solutions (CTSH) and it's their second largest US equity long position as detailed in our brand new issue of Hedge Fund Wisdom.

A solid portion of Lone Pine's position in VIT is in its Lone Dragon Pine fund, which focuses on emerging markets. For other buys from this hedge fund, yesterday we posted up their position in Michael Page International.

Per Google Finance, VanceInfo "is an information technology (IT) service provider and an offshore software development company in China. The Company’s range of IT services includes research and development services, enterprise solutions, application development and maintenance (ADM), testing, as well as globalization and localization."

Tuesday, August 23, 2011

Last Chance For Substantial Discount to the Value Investing Congress

The Value Investing Congress is coming up quickly on October 17th & 18th in New York City. This is your last chance to benefit from substantial savings. Market Folly readers can save $1,700 with discount code: N11MF5. Register in the next seven days before the price increases by $400. Click here to receive the discount.

Alexander Roepers of Atlantic Investment Management just committed to speak at the event. He manages a $1.5 billion global equity hedge fund.

He joins an all-star hedge fund line-up of speakers including Pershing Square's Bill Ackman, Kynikos Associates' Jim Chanos, Scout Capital's Adam Weiss & James Crichton, Gotham Capital's Joel Greenblatt, and many more.

The price increases in seven days, so this is your last chance for substantial savings: receive your discount to the Value Investing Congress.

Why Strategist Jeff Saut Thinks There Isn't a Recession

Market strategist Jeff Saut recently said to buy select stocks even though that Dow Theory registered a sell signal. He's received lots of questions as to why he did so and addressed this in his recent market commentary.

Mainly, his bullish stance (at least in the short-term), stems from massively oversold levels in the markets. He also bases this on the backdrop that the economy is not headed to a recession. He writes,

"My controversial non-recession 'call' is driven by the fact that industry analysts are still bullish on earnings with the S&P 500's consensus estimate approaching $114 for 2012. Corporate insiders are clearly bullish as they have been buying their own company's shares at the highest rate since the bottom in March 2009. Layoffs have slowed and while the economy is certainly slowing, metrics like L.A. seaport traffic, railcar loadings, etc. are not falling off a click like they did prior to the 2008 recession."

We pointed out massive insider buying two weeks ago as well. More than anything, Saut is convinced that a confluence of indicators reinforce his belief that select stocks are cheap. You can view Saut's favorite stocks here.

Embedded below is Saut's recent investment strategy where he outlines how the current market action is somewhat parallel to that of October 1978 and 1979:

You can download a .pdf copy here.

Lone Pine Capital Discloses Michael Page International Position

Stephen Mandel's hedge fund Lone Pine Capital has just disclosed a potentially new (more on that below) position in Michael Page International (LON: MPI).

Due to trading on July 16th, Lone Pine breached the UK regulatory disclosure threshold with a 3.21% ownership stake. You can view Lone Pine's latest US equity holdings in the brand new issue of our Hedge Fund Wisdom newsletter.

Lone Pine has actually owned Michael Page stock before. Back during the tumultuous credit crisis, they increased their stake all the way up to 6.37% of outstanding shares.

However, when the panic was seemingly at its height during March 2009, Lone Pine reduced its stake below the 3% threshold ~ perhaps a reminder that even the best hedge funds were forced into uncharacteristic maneuvers during the crisis.

UK Disclosure Rules

The UK's disclosure rules only require funds to disclose when they go above or below a 3% ownership stake in a company (think of it as a line in the sand.) While we get to see more positions this way (compared to a 5% threshold in the US), the downside is we don't really ever know when a fund completely sells out of a position.

In Lone Pine's case in particular, they could have held a small stake in the company all this time only to recently start buying enough to trigger the filing. Or, they could have exited the name back in 2009 and are starting a new position now. There's no way to tell.

But what we do know is that Lone Pine now has a 3.21% ownership stake in the company.

Company Background

Per Google Finance, Michael Page International plc is a specialist recruitment consultancy. The Company operates in Continental Europe, Middle East and Africa (EMEA), and the United Kingdom. Clients ranging from global multi-nationals to small and medium enterprises (SMEs) source permanent, contract, temp and interim talent in accounting, tax and treasury; actuarial, consultancy, strategy and change; design, education, engineering and manufacturing, financial services and banking, health and social care, hospitality and leisure, human resources, information technology, legal, marketing, policy, procurement and supply chain, property and construction, retail, sales and secretarial."

View the rest of Lone Pine's portfolio.